Moody's revises outlook on Adani Ports to stable from negative

Moody's Investors Service has revised its outlook on Adani Ports and Special Economic Zone to stable from negative, while retaining its rating at Baa3 (investment grade).

"The change in APSEZ's ratings outlook to stable reflects the stabilization in the company's operating performance and a decline in its financial leverage", said Abhishek Tyagi, a senior analyst at Moody's.

"The weakened operating performance and financial metrics were key drivers behind the previous negative outlook, and APSEZ has undertaken a number of initiatives to address these issues and strengthen its credit profile within the rating," he added.

The agency had in May 2016, changed its outlook to negative based on APSEZ's "lower volume growth, mainly due to lower coal volumes, and an increase in capital expenditure and financial leverage".

"The sharp decline in coal cargo for APSEZ's ports due to reduction in coal imports by India, together with some state-owned utilities shifting their cargo to Government owned ports, is likely to have material impact on the growth trajectory of APSEZ", Tyagi had said, adding that it would "reduce the company's ratings headroom."

On Monday, the agency attributed the latest revision in outlook also to a reduction in related party loans, which were previously clouding the company's credit profile.

"Over the next 12-18 months, we expect APSEZ to continue its focus on 1) rebalancing its volume mix towards higher container shipments, and 2) maintaining a financial leverage that supports its Baa3 rating, including Funds from Operations (FFO)/Debt staying above 15 per cent", said Tyagi.